A secretary in the Department of Justice made a U-turn in a legal case yesterday, co-operating with police after initially refusing to speak to investigators, the District Court heard.

Rebecca Nip Sau-ching is the secretary of Gavin Shiu, senior assistant director of public prosecutions. Shiu had been ordered to appear at yesterday's court hearing into the deletion of documents from Department of Justice computers.

Nip was scheduled to give evidence at the hearing but was unable to attend because she was giving evidence to the police, the court was told.

Two people told the court about Nip's earlier refusal to co-operate with investigators. Police Chief Inspector Chan Tin-chu recalled that Nip had been 'emotionally unstable and refused a police interview' when the police earlier investigated the deleted files. Daniel Marash SC, for the government, said Shiu and Nip were both 'potential suspects' in relation to the missing files.

Nip, he said, had refused to give any information to Department of Justice officers when interviewed about the documents.

But the court heard later that Nip admitted Shiu had told her to delete the files.

The documents relate to a fraud trial that was adjourned in May because of the missing evidence. That trial involves allegations that letters of credit were misused at the Hong Kong-listed Yueshou Environmental company.

The firm's former vice-chairwoman, Kelly Cheng Kit-yin, 57, her daughter Carmen Cheng Wei-ming, 37, and three company directors are charged with 11 counts of conspiracy to defraud and two counts of dealing with the proceeds of an indictable offence.

Chan told the court yesterday that the police investigation into the missing files was still under way. On June 7 this year, police took Shiu's and Nip's computers, and two of Shiu's thumb drives, from his office.

Meanwhile, British defence counsel Jonathan Caplan QC asked for a permanent stay of proceedings in the Yueshou case due to both the delay in the prosecution and the 'improper' conduct of a liquidator involved in the case.

'With regard to the conduct and the motive of the liquidator of Wing Fai Construction [which has links with Yueshou Environmental] - the liquidator initiated criminal proceedings for improper purposes to force the defendants to settle the civil proceeding,' Caplan said.

'At the end of the day, the issue is to what extent you [the court] are confident in relying on the evidence given by the officer of the department. What has happened [in the department] may have undermined the public's confidence in the integrity of the criminal justice [system],' he said.

The hearing continues today before District Judge Douglas Yau Tak-hong. Shiu and Nip are expected to testify.